Stocks sank today as tensions in Ukraine heightened and some big names including AIG and Twitter fell, putting pressure on their respective sectors. The Dow Jones Industrial Average (DJINDICES:^DJI) shed 130 points or 0.8% with drugmakers Merck and Pfizer again falling the furthest. The two declined as Merck sold its consumer health division, which includes brands such as Afrin cold remedy, for $14.2 billion, to Bayer, and AstraZeneca continued to signal that it was not interested in being acquired by Pfizer, outlining a plan to make sales grow to $45 billion within 10 years to help convince shareholders the company was better off as an independent entity. Outside the Dow, results weren't any better, as the S&P 500 lost 0.9% and the Nasdaq fell 1.4%.
Only one economic report was released today, the March international trade report, which showed the trade deficit narrowing slightly from $41.9 billion to $40.4 billion, essentially in line with analyst estimates, but the figure was lower than government estimates in the first-quarter GDP report, meaning that figure could be revised downward to show a contraction. That would mark the first time the economy had shrunk in three years, though much of the blame has been pinned on poor winter weather, and data has shown a resurgence since then.
Turning to individual stocks, Whole Foods Market (NASDAQ:WFM) plummeted after hours, falling 14% on a rotten earnings report. The organic grocery chain missed the mark in nearly every category, reporting revenue, earnings, and guidance all below expectations. Though Whole Foods pioneered the organic foods segment it still leads, the company has come under pressure from increased competition, including mainstream grocers such as Wal-Mart and Kroger, which have entered the high-growth organic business. Whole Foods is still growing, but perhaps not at a rate that warrants the stock's high price tag. Revenue increased 9.7% in the quarter to $3.32 billion, below the consensus at $3.34 billion, as same-store sales improved 4.5%, a respectable clip. Net income, however, was flat at $0.38 per share as food costs rose and its gross and operating margins fell by 50 basis points. Analysts had expected a profit of $0.41 per share. The company also dialed down its full-year EPS guidance from a range of $1.58-$1.65 to a range of $1.52-$1.56, below the consensus at $1.61. With sales growing at just around 10%, it may be hard for the stock to justify a P/E close to 30.
Moving in the opposite direction today was Office Depot (NASDAQ:ODP), whose shares jumped 16% after the company reported earnings and announced a store closure plan this morning. The office-supply retailer posted an adjusted EPS of $0.07 against expectations of $0.03, and said that sales trends improved throughout the quarter. It also said it will close at least 400 of its nearly 2,000 stores in the U.S., adding $75 million to annual cost savings from its merger with Office Max. Still, overall sales fell 5% on a 3% decline in same-store sales, indicating continued problems for a contracting industry. Looking ahead, management said that "market trends will remain challenging," but lifted its operating income guidance to at least $160 million from at least $140 million because of early realization of cost savings. Office Depot's prospects look improved after today's report, but I'm still concerned about long-term profitability in a declining industry.
John Mackey, co-CEO of Whole Foods Market, is a member of The Motley Fool's board of directors.
Jeremy Bowman has no position in any stocks mentioned. The Motley Fool recommends AIG, Twitter, and Whole Foods Market; owns shares of AIG and Whole Foods Market; and has options on AIG. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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